Prices in Russia have risen faster in the past two weeks than the government had hoped for the entire year, according to official statistics published Wednesday showed.
Inflation hit 2.1% for the seven days between March 5 and 11, the Rosstat statistics agency said. This was the second highest weekly figure in more than two decades, down slightly from the 2.2% price increase. registered a week earlier.
The figures indicate that prices have risen by more than the central bank’s 4% annual inflation target in just 14 days, adding to the pressure on households and businesses that were already battling the coronavirus pandemic and nearly a decade. of standard stagnant life.
Moscow’s invasion of Ukraine and the imposition of severe Western sanctions have plunged the Russian economy into a crisis economic crisis which according to economists will probably be the worst since the fall of the Soviet Union. The ruble collapsed, prompting the Central Bank to raise interest rates to 20% and ban Russians from buying foreign currencies or transferring dollars and euros abroad.
Shoppers in many cities have reported difficulties in obtaining some basic necessities like sugar – whose average prices have risen 15% over the past 11 days, Rosstat said – and the Kremlin has blocked some agricultural exports in an effort to stabilize. prices at home.
The prices of over-the-counter medicines have also risen sharply since Moscow invaded Ukraine. As well as imported goods and products that depend on foreign parts, such as televisions, smartphones and cars, which have all become at least 10% more expensive in the past two weeks, Rosstat said.
Economists broadly predict that the Russian economy will collapse by at least 10% this year. In line with previous crises, the pain is expected to fall on the country’s private sector and Russian families.
“Families will certainly be hit very hard and will pay a heavy price,” Mario Bikarski, an analyst with the Economist Intelligence Unit, told the Moscow Times. “Businesses are also suffering a lot … It will be the private sector and Russian families, especially low-income families, that will suffer the most”.
The Central Bank of Russia will meet again on Friday to decide whether to raise rates again in response to the economic crisis. His emergency interest rate hike to 20% at the end of February was seen as a necessary but painful move to avoid an even deeper currency crisis and a more rapid acceleration of inflation.
Governor Elvira Nabiullina hasn’t been seen in public since she announced the rate hike just days after Russia launched its war on Ukraine, when she appeared all in black and refused to answer reporters’ questions. . Previously seen as a star of the international investment community, she has come under pressure from some Western investors to step down following the Kremlin’s attack on her pro-Western neighbor.
On Friday, the Bank will have to balance accelerating inflation risks with the looming recession. High inflation would typically trigger rate hikes, but steep interest rates weaken growth, which could accentuate the depth of Russia’s looming slowdown.
“Inflation in Russia has already accelerated … at the same time, the current shock to the Russian economy is deeply recessive,” said Renaissance Capital economist Sofya Donets. He predicted the regulator would keep rates at their record 20% on Friday.
Economists interviewed by the Central Bank in early March said they expect inflation to hit 20% for the year, with interest rates remaining in double-digit territory at least until the end of 2023.